Firm level governance and institutional determinants of liquidity: evidence from Sub Saharan Africa
Firm level governance and institutional determinants of liquidity: evidence from Sub Saharan Africa
This study contrasts well established liquidity measures, namely volume-based turnover ratio, related price-impact Amihud (2002) construct and the multidimensional Liu (2006) indicator alongside the Lesmond, Ogden and Trzcinka (1999) proportion of zero daily returns metric in explaining bid-ask spread plus commissions costs. We control for six critical firm governance characteristics that impact liquidity alongside the market-based controls that are conventionally solely included in the literature. Using a unique sample of 12 Sub Saharan African (SSA) equity markets, namely Kenya, Mauritius, Zambia, Zimbabwe, Botswana, Malawi, Namibia, Nigeria, Ghana, BRVM (Cote d’Ivoire), and then South Africa’s ALT-x and Main boards we find evidence that state and foreign venture capitalist involvement in firms enhances liquidity while involvement of foreign partners, entrepreneurial founders, domestic venture capital and inclusion within an extended business or family network has opposite effect. The evidence supports the use of the proportion of daily zero returns measure in preference to other measures in capturing illiquidity. Furthermore we find that liquidity is closely associated with three of six World Bank Governance measures of institutional quality with these being government effectiveness, regulatory quality and rule of law.
Econometric Society, Africa Region
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
15 July 2013
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Hearn, Bruce
(2013)
Firm level governance and institutional determinants of liquidity: evidence from Sub Saharan Africa.
In 18th Annual Meeting of African Econometric Society, Accra, Ghana.
Econometric Society, Africa Region..
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Abstract
This study contrasts well established liquidity measures, namely volume-based turnover ratio, related price-impact Amihud (2002) construct and the multidimensional Liu (2006) indicator alongside the Lesmond, Ogden and Trzcinka (1999) proportion of zero daily returns metric in explaining bid-ask spread plus commissions costs. We control for six critical firm governance characteristics that impact liquidity alongside the market-based controls that are conventionally solely included in the literature. Using a unique sample of 12 Sub Saharan African (SSA) equity markets, namely Kenya, Mauritius, Zambia, Zimbabwe, Botswana, Malawi, Namibia, Nigeria, Ghana, BRVM (Cote d’Ivoire), and then South Africa’s ALT-x and Main boards we find evidence that state and foreign venture capitalist involvement in firms enhances liquidity while involvement of foreign partners, entrepreneurial founders, domestic venture capital and inclusion within an extended business or family network has opposite effect. The evidence supports the use of the proportion of daily zero returns measure in preference to other measures in capturing illiquidity. Furthermore we find that liquidity is closely associated with three of six World Bank Governance measures of institutional quality with these being government effectiveness, regulatory quality and rule of law.
Text
SSA Liquidity Constructs BH 21-Feb-2013
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Published date: 15 July 2013
Venue - Dates:
18th Annual Meeting of African Econometric Society, University of Ghana, Accra, Ghana, 2013-07-15 - 2013-07-18
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Local EPrints ID: 423304
URI: http://eprints.soton.ac.uk/id/eprint/423304
PURE UUID: b1a393a1-f0e4-451a-987d-f93752ef9781
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Date deposited: 20 Sep 2018 16:30
Last modified: 16 Mar 2024 04:37
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